Tax evasion is the illegal evasion of taxes by individuals, corporations, and trusts. Tax evasion often entails taxpayers deliberately misrepresenting the real state of their affairs to the tax authorities to reduce tax liability and includes dishonest tax reporting, such as declaring less income, profits or gains than the amounts actually earned or overstating deductions.
It is a criminal offence and offenders are expected to pay hefty fines and penalties, including serving imprisonment terms.
A tax avoidance scheme may involve an arrangement that is artificial or has little or no commercial substance and is designed to obtain a tax advantage. Tax avoidance is a legal way to reduce tax obligations.